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The notices were issued by the Mumbai office of DRI late last week, and sources said these were issued against five companies of the Adani Group for alleged over-valuation (of Rs 1,100 crore), two companies of ADAG (Rs 300 crore) and two Essar Group firms (Rs 332 crore).
In an e-mail response, an Essar spokesperson said, “We strongly refute and deny the allegation. All our procurements stand the strictest scrutiny of law. Our project costs compare favourably with similar projects built in India."
The spokesperson added, "We reiterate that Essar group is strongly committed in adherence to law of the land. We wish to point out that all the procurements are from overseas suppliers and were made at arm’s length price, which were not only at the lower quadrant compared to peer projects built in India, but also certified to be reasonable by reputed technical consultants."
Adani Group and ADAG spokespersons said they had not received any such notice.
The matter came into light when DRI raided 100 shipping companies, intermediaries and laboratories across the country in 2014, searching for documents that showed the real value of the imports. The operations were carried out in Maharashtra, Delhi, Gujarat, Karnataka, Andhra Pradesh, Odisha, West Bengal and Kerala. Initial estimates by the agency pegged the overvaluation at Rs 29,000 crore in the period 2011-2014.
Business Standard has reviewed a copy of the investigation report, according to which 40 leading power companies are being probed.
According to the report, certain importers of Indonesian coal were artificially inflating the import value as compared to the actual value. The modus operandi was adopted by power generating companies and traders, who supplied the imported goods to these companies, said the report. The report further indicated that while Indonesian coal was directly shipped to importers in India, the invoices were routed through one or more intermediaries based in Singapore, Dubai, Hong Kong and the British Virgin Islands (BVI) for the purpose of inflating value.
DRI found over-valuation to the extent of 50-100 per cent after comparing the export value of Indonesian coal and the values declared before Indian Customs. It further said inflated invoices received in India were found to have been issued by intermediary invoicing agents based in foreign countries. These firms appear to be either subsidiary companies of Indian importers or their front companies, the report said. Under the Asean-India Free Trade Area (AIFTA) rules, it is mandatory to submit the original import copy to the Customs authority and a duplicate of this is to be retained by the issuing authority of the exporting country, while a third and fourth copy of letters would be retained by importers and exporters. In this case, it was observed that the importers submitted photocopies to the Customs, instead of the original documents.
DRI said investigation of these companies has covered imports till March 31, 2016. On the basis of this, the government is preparing to approach its Singaporean counterpart seeking information about companies engaged in over-invoicing, said sources.
However, Essar claims the calculations are erroneous.
“The so-called margins or excess payments, as the case may be, worked out by the DRI do not take into account all the costs incurred by the overseas supplier, thereby resulting in highly inflated margins as against the normative net margins made by the supplier, thus leading to erroneous conclusions. As the supplies are in the nature of project imports, suppliers had provided substantial services to the importing companies by expediting services, ensuring quality standards, timely monitoring and inspection/testing, providing the performance guarantee to the Indian importing companies, and would have incurred substantial financial and other costs in providing these services. The net margin earned by the supplier are reasonable and in line with similar supplier margins," Essar said. This is only a show cause notice and we are confident that during the proceedings, the explanations provided will be considered satisfactory by the adjudicating authorities, Essar said.
BREWING TROUBLE
- The notices were issued against five companies of the Adani Group for alleged over-valuation (of Rs 1,100 crore), two companies of ADAG (Rs 300 crore) and two Essar Group firms (Rs 332 crore)
